July 18 (Reuters) – Bank of America (BofA) reported a decline in second-quarter earnings on Monday as its investment bank’s earnings plummeted as business fell to record highs last year.
Wall Street investment bankers have watched last year’s record trading volumes drop in the first half of 2022 amid market volatility, geopolitical tensions and a sense of loss and risk gripping global markets.
Earnings attributable to Bank of America shareholders fell to $5.93 billion (€5.86 billion), or 73 cents a share, for the quarter ended June 30 from $8.96 billion, or $1.03 per share. share a year earlier.
Amid falling stock prices and a slowdown in mergers and acquisitions, commissions from Bank of America’s investment banking business fell 47% to $1.1 billion in the quarter.
Its revenue, net of interest expense, rose 6% to $22.7 billion over the same period.
The US Federal Reserve quickly raised interest rates to curb record inflation. If the risk of a recession persists, this measure, for the time being, boosts the profits of banks, which usually benefit from high interest rates.
Bank of America’s net interest income, which measures the difference between the interest earned on loans and the amount paid on deposits, jumped 22%, or $2.2 billion, to $12.4 billion.
Due to the composition of its balance sheet, the group is more sensitive to changes in interest rates than the major US banks.
“Our retail clients in the US have remained resilient, and deposit balances and spending levels remain high,” said chief executive Brian Moynihan.
However, the resilience of US consumers is being tested by inflation, which is at levels not seen in the last four decades, but spending trends are largely maintained, supporting the bank’s earnings.
Spending trends are a key indicator of consumer financial health and are closely linked to the performance of the retail banking business, which saw revenue rise 12% to $9.1 billion in the second quarter.
The bank’s combined spending on credit and debit cards jumped to $220.5 billion, up 11% from the previous quarter and up 10% year-on-year.
The group recorded average deposits of over $1,000 billion, up 10% from the previous year.
However, the Fed’s aggressive stance on lowering inflation puts credit forecasts in a quandary, as rapidly rising borrowing costs could hurt demand.
Bank of America, the second-largest U.S. bank by assets, released $48 million in provisions for the quarter, up from $2.2 billion a year earlier, bringing its total loan loss provisions to $500 million.
The bank stands out from rivals JPMorgan Chase & Co and Wells Fargo & Co, which increased their loss provisions by $428 million and $235 million, respectively, in the quarter.
The Bank of America title, which has fallen nearly 28% since the start of the year, has held steady in gas station trading. (Reporting by Mani Saini and Niket Nishant in Bangalore, Elizabeth Dilts Marshall in New York; French version by Dagmara Makos, edited by Kate Entringer)